The merits of Bulgaria for trade and investment, despite the collapse of a large domestic bank

Written by Nigel Davies on 21 July 2014

The online journal "Bulgaria Now" interviewed British Ambassdor Jonathan Allen in late June about why trading with Bulgaria and neighbouring countries makes sense for many international businesses. A link to that interview and a set of very useful supporting notes can be accessed here.

Within a month of month of Ambassador Allen's interview, the Bulgarian coalition government is on the verge of resignation and there was a run on two large privately owned banks, Corporate Commercial Bank and First Investment Bank.

The coalition government has been under increased pressure recently due to disageements with the EU over the proposed construction of the South Stream gas pipeline from Russia as well as a poor performance in the European Parliament elections. A caretaker government led by President Plevneliev is expected to take over later in July ahead of elections scheduled for 5 October. It is hoped that the interim government will be pro-business and pro-reform and that momentum will continue after the next elections.

Bulgaria has not had a banking crisis since 1997, and is often praised for its conservative fiscal policy, use of a currency board to peg the Lev to the Euro and well capitalised and liquid banking operations, under the supervision of Bulgaria's National Bank. Confidence in First Investment Bank was restored with an emergency credit line, but investigations are continuing into the operations and future of Corporate Commercial Bank which is currently in the control of the authorities. While the bank is closed, depositors cannot get access to their funds. This not only includes individual depositors but also several large cash-generating state owned companies.

"Bulgaria Now" asked Nigel Davies of Wyn River to comment on the recent developments, which he believes do not alter the basic competitive advantages of Bulgaria as a member of the EU with a highy skilled and low cost workforce, at the centre of a large and strategic geography and market in South East Europe. You can hear Nigel Davies's interview here.